Company Quarterly Earnings Update – VNM VN – Q3 2022

Summary of the Q3/2022 results and outlook of Vinamilk JSC (VNM VN)

  • Net revenue remained flat at VND44,888bn due to a variety of factors as (1) a relatively unchanged domestic sales figure of VND37,904bn due to the dairy industry’s -4.0% y/y decline in urban area in H1, and (2) a 25.2% y/y increase in Driftwood and Angkor milk’s revenue to reach VND3,243bn mainly caused by a recovery of US schools and VNM’s quick expansion in the Cambodian market, (3) a -13.6% y/y decrease in export sales due to lower orders in the Chinese market during lockdown and lower orders in Middle Eastern markets stemming from high inflation and the strength of the USD.
  • 9M’s net profit declined by 20.3% y/y to VND6,647bn, which is lower-than-expected mainly explained by (1) the high input material prices of Whole Milk Powder (WMP), higher transportation costs continuing to impact Q3’s gross margin, and (2) the impact of FX fluctuation.
  • VNM’s financial position remained solid, as cash and equivalent made up 43.8% of total assets. Leveraging was low with D/E and D/A ratios of 0.28x and 0.19x, respectively.
  • For 2022: Q4’s net revenue is projected to grow by 3.8% y/y driven by (1) high market demand for Tet holiday, which falls earlier in 2023, (2) significant growth from Driftwood & Angkor milk and new plant-based drinking milk “Moc Chau Milk”. Additionally, we forecast that Q4’s gross margin would improve by 1.8% vs 9M2022 to 42.0% thanks to a decrease in SMP & WMP prices. Accordingly, Q4’s net profit is expected to grow by 2.7% y/y to VND2,255bn. All in all, due to the lower-than-projected 9M results, 2022F net profit is revised down to VND9,088bn (-13.7% y/y).
  • For 2023: we expect the top line to grow by 6.4% to VND65,186bn. The key drivers are: (1) domestic revenue is expected to grow by 5.1% to VND49,729bn thanks to (i) growing demand for fresh milk, flavored milk and yogurts, (ii) VNM’s rapid expansion of retail stores nationwide, (iii) full recovery of the school milk program and HORECA channels (hotel, resort, restaurant, and café), and (iv) innovation in products and packaging attracting more young consumers, (2) a recovery of export markets as well as a double-digit growth rate in Driftwood & Angkor milk. The gross margin is projected to recover to 42.3% ahead of the decrease of SMP & WMP prices. As a result, we expect a recovery of 2023F net profit to VND10,637bn (+17.0% y/y).


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